Warsh's Fed Decision: Dollar Set for Surprise Drop Despite Expected Hold

Kevin Warsh's Federal Open Market Committee (FOMC) decision on July 29 is widely expected to hold interest rates at 3.50% to 3.75%, marking a fifth consecutive meeting without an increase. However, TD Securities says the US dollar could still drop despite these expectations.

TD Securities argues that traders are overpricing the odds of a surprise hike, which would lead to a stronger dollar and potentially disrupt global financial conditions. According to CME FedWatch data, there is a 95% to 98% chance of no change in interest rates at this meeting.

Even with these high odds, TD Securities forecasts a 2% decline in the US dollar in the second half of 2026 if the Fed holds as expected. The bank believes that policymakers are unlikely to deliver a rate increase, especially given the current geopolitical tensions and oil prices.

A hold decision by the Fed could have significant implications for Bitcoin markets, with some analysts predicting a bullish outcome if the numbers line up. However, TD Securities' dollar call adds another variable to this setup, as a weakening dollar has historically coincided with periods of relative strength for Bitcoin and other risk assets.